New Chrysler Will Now Answer Pre-Bankruptcy Liability Claims
Reversing their Previous Denial of “Legacy Liabilities” according to their Section 363 Quick Sell
In February of 2009, Chrysler sought to turn over a new leaf. As a sort of born-again car company, they called themselves the “New Chrysler”, and used section 363 of the Bankruptcy Code to quickly sell assets to Fiat.
The Chrysler bankruptcy filing was the epitome of a high-profile bankruptcy case, and it came with its share of sharp public scrutiny. Their case was held at the U.S. Bankruptcy Court, and its confirmation was supported by President Obama’s administration who cited the 35,000 workers who would keep their jobs because of it. Chrysler’s bankruptcy was deemed by critics a “surgical bankruptcy”, where all of the equity sold to Fiat was new equity, including government loans (which the U.S. entered without attaching interest and acknowledging that Chrysler probably couldn’t pay it off).
U.S. Bankruptcy Court Judge Gonzalez opposed their initial bankruptcy filing and stated, “Various objections were raised related to property damage claims and personal injury and wrongful death claims, including those which have not yet occurred.” He later relented after due process and sided with Chrysler’s filing. Many tongues have been wagging in the legal community that Section 363’s bankruptcy auction sale “free and clear of interests” shouldn’t amount to “free and clear of claims”. U.S. bankruptcy court eventually decided that future personal injury or would be treated as unsecured creditors, picking over the scant remains of the “Old Chrysler’s” once-deep pockets.
Chrysler acquiesced to public scrutiny and decided that despite the legal red tape that they had created, the “New Chrysler” didn’t want the scandal of hundreds of unanswered personal injury and wrongful death claims. Instead, the “New Chrysler’s” spokesperson says they are following G.M.’s example of accepting old liability claims, as they too underwent a high-profile, government-funded “surgical bankruptcy.” These two company’s acknowledgment of pre-bankruptcy injury claims could very well set a moral standard for high profile companies.
Earlier this year, President Obama had this to say about Chrysler’s bankruptcy: “No one should be confused about what a bankruptcy process means. This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler's revival.” Strong words coming from a President so often compared to Abe Lincoln, the leader of the Free world who also filed for personal bankruptcy twice.
To learn more about Presidential-approved bankruptcy, our bankruptcy-focused legal team at Legal Helpers can guide you through it. We’re available to discuss your debt solution toll-free, at 1.800.260.1402
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